For those of you fortunate enough to own a cottage or country property, we know that there is often a desire to keep the property in the family for many generations. To successfully pass on a cottage, it requires careful planning and often some difficult conversations within the family.

The COVID pandemic has potentially added some additional complexity to this planning. Over the past two years, we have seen incredible appreciation in these properties. This was recently brought to our attention by one of our clients. Her estate plan would have one of her three sons inheriting the cottage, while the remaining two sons would receive a third of the estate. We are now in the process of accessing the impact of the increased value of the cottage to see what impact it will have on the total estate. There are several considerations:

• The potential exists that the value of the cottage will exceed the pro rata share of the one son, so he would owe the other brothers money.
• The tax liability on the cottage will have increased. Since the cottage will not be sold, the tax bill will have to be funded from liquid assets in the remainder of the estate. This could potentially make the division of assets more complicated.
• The costs of owning these valuable properties will go up. Property taxes, maintenance, and ongoing repairs can really add up on these properties. Does the person inheriting the cottage have the financial flexibility to meet these expenses?

Fortunately, we did some estate planning many years ago that put in place some funding to help offset the taxes on the cottage. That being said, we are in the process of valuing the cottage to measure the impact on the current estate plan.

Please give us a call if you would like to discuss your cottage / country property estate plan.